LCCs Coming Down Hard
ARLINGTON (theHub.com) - Another major round of airfare cuts is under way as low-cost carriers reduce fares for late summer and early fall to boost their market share. The fare war is the latest fallout from the discount airlines' rapid expansion and the resulting need to fill new planes on new routes, according to a Wall Street Journal report. What's notable is the breadth of their cuts this time, as they are reducing prices systemwide rather than selectively trimming fares on specific routes. This reality is forcing legacy airlines to follow suit, responding broadly, and leading to another fierce price war, according to the article.
This aggressive and unusually early round of fare sales by the low-cost carriers is threatening to wipe out any chance of profits for the industry in the autumn, according to a separate article in today’s New York Times. AirTran last week, for example, cut its fares 30 percent across the board. At the same time, Southwest cut many of its one-way prices to less than $100. ATA Airlines has also implemented fare cuts. The discount-initiated fare war comes as the low-cost carriers are aggressively expanding and are determined to keep gaining business at the expense of the more established carriers, the newspaper said. During the past several days, major carriers have dropped prices on more than 48,000 fares last week, according to Travelocity.com.
Estimates on BestFares.com point to at least 300 "city pairs," or routes in the U.S., that are currently selling at $99 or less round-trip. All together, prices on more than two-thirds of all domestic routes have been reduced during the past week, industry experts say. "So much capacity keeps coming into the system, to keep the airplanes full they're offering a stream of discounts," says Ray Neidl, airline stock analyst at Blaylock & Partners in New York. For example, AirTran Airways plans to increase its fleet to 87 aircraft this year, up from 73 aircraft last year. JetBlue's capacity is up 43 percent for the first six months of this year, and last month the airline said it plans to add as many as 17 planes a year until 2012.
ARLINGTON (theHub.com) - Another major round of airfare cuts is under way as low-cost carriers reduce fares for late summer and early fall to boost their market share. The fare war is the latest fallout from the discount airlines' rapid expansion and the resulting need to fill new planes on new routes, according to a Wall Street Journal report. What's notable is the breadth of their cuts this time, as they are reducing prices systemwide rather than selectively trimming fares on specific routes. This reality is forcing legacy airlines to follow suit, responding broadly, and leading to another fierce price war, according to the article.
This aggressive and unusually early round of fare sales by the low-cost carriers is threatening to wipe out any chance of profits for the industry in the autumn, according to a separate article in today’s New York Times. AirTran last week, for example, cut its fares 30 percent across the board. At the same time, Southwest cut many of its one-way prices to less than $100. ATA Airlines has also implemented fare cuts. The discount-initiated fare war comes as the low-cost carriers are aggressively expanding and are determined to keep gaining business at the expense of the more established carriers, the newspaper said. During the past several days, major carriers have dropped prices on more than 48,000 fares last week, according to Travelocity.com.
Estimates on BestFares.com point to at least 300 "city pairs," or routes in the U.S., that are currently selling at $99 or less round-trip. All together, prices on more than two-thirds of all domestic routes have been reduced during the past week, industry experts say. "So much capacity keeps coming into the system, to keep the airplanes full they're offering a stream of discounts," says Ray Neidl, airline stock analyst at Blaylock & Partners in New York. For example, AirTran Airways plans to increase its fleet to 87 aircraft this year, up from 73 aircraft last year. JetBlue's capacity is up 43 percent for the first six months of this year, and last month the airline said it plans to add as many as 17 planes a year until 2012.
